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Authorities bust smartphone theft ring based in Twin Cities

A Twin Cities family directed thieves to steal tens of thousands of smartphones across the country and then sold them to buyers in the black-markets of the Middle East and China, federal authorities said Tuesday following the indictments of 20 people involved in the organized crime ring.

Authorities say that the sophisticated "Mustafa Organization" used runners to fly across the country to steal phones outright or to buy them from retailers with false identities under bogus server contracts. The phones would then be resold overseas under the cover of the wireless phone stores the family owned, federal authorities say.

Authorities estimate that the family made upward of $4 million selling stolen phones over the past eight years. They say that the estimated profit on the resale of each stolen phone ranged between $500 to $1,000. One defendant who cooperated with federal agents said that he had sold more than 9,000 stolen phones since 2006, most them ending up in the hands of the Mustafa family crime ring, according to search warrant affidavits filed Tuesday in federal court by a U.S. Secret Service agent.

"Identity theft rings are the modern face of organized crime," said U.S. Attorney Andy Luger. "Identity thieves often use fraudulent identities to obtain goods, which they can sell for cash. These defendants are charged with obtaining stolen cellphones through identity theft and fraud, and then selling them for exorbitant profits.

"We are able to stand here today having taken out one of the largest criminal enterprises in the Twin Cities," Luger said.

Smartphone thefts have become so endemic across the country that in the past year law enforcement has been pressuring manufacturers to help them thwart thieves who focus specifically on ripping off phones.

The Federal Communications Commission estimates that about 40 percent of thefts in major American cities now involve cellphones.

The four major wireless providers in the country -- Verizon Wireless, AT&T, T-Mobile and Sprint -- agreed last year to begin sharing a database of serial numbers tied to stolen phones. By the end of this year, a phone reported stolen will, theoretically, no longer function on any of the provider networks.

But that doesn’t address the overseas black market because foreign wireless carriers are not participating in the anti-theft campaign. The current price for a new iPhone 5 in the Middle East is estimated between $1,000 to $1,200, according to authorities. Domestically, the iPhone sells for about $648 retail, or less if the buyer signs a contract with a service provider.

At least seven of those indicted are members of the Mustafa family with ties to the ownership of 13 phone stores in the metro area. Eleven people indicted were reportedly hired as runners to steal the phones, and two associates were responsible for moving money from the operation, authorities say.

About 300 law enforcement personnel from various agencies were involved and 100 of them came in from across the country to aid local law enforcement in a coordinated series of arrests that took place early Tuesday morning.

The Mustafa family members are Jamal, Kanan, Edwan, Talal, Bilal, Naser and Nizar, according to the affidavit. The family members own wireless stores in Minneapolis, St. Paul and Robbinsdale, records show. Authorities say that the family operates these stores, ostensibly, as a single unit -- transferring cellphone inventory and allegedly commingling illicit profits with legitimate sales.

Jamal Mustafa, who operates six cellular phones stores in the metro, is considered the patriarch of the family and the "apparent leader of the conspiracy," according to authorities. An unidentified co-defendant told law enforcement that Jamal Mustafa paid runners for their travel, provided stolen and counterfeit identification used to obtain phones by contract fraud. When the defendant was arrested last year in Utah, he was carrying more than 80 counterfeit identification documents used to open lines of credit at various retail stores, according to the affidavit.

In May 2013, St. Paul police began investigating a group tied to stealing phones by theft, fraudulent identification and check schemes. Those officers, part of the Organized Retail Crimes Unit, began working with various state and federal law enforcement across Minnesota and Wisconsin, investigating a shoplifting ring -- known as the "Sunrise Group" -- that specifically targeted Wal-Mart stores. They found that the "Sunrise Group" got its name from the Mustafa family’s stores, many of which are under the same name.